Getting Australia Started

The Digital Age is transforming all aspects of our lives, broadening our horizons and creating limitless potential.

This transformation will affect everything - from how we communicate, educate, undertake commerce, even the way we seek medical treatment. It is changing the way we live, the way we work and even the way we engage with government.

As with all transformative changes, it presents challenges but also immense opportunities.

The creativity and ingenuity of Australians means we are well placed to exploit the considerable opportunities this will open up.

But to embrace these opportunities we need a smart new plan to grow new and emerging businesses and enterprises in the digital economy - securing the jobs of today and creating the jobs of tomorrow.

What the issue?

The internet and new technologies are massively disrupting the world of work. In June 2015, the Committee for Economic Development of Australia published a report which predicted that as many as five million of the jobs we do today - two out of every five jobs - will be replaced by machines by 2030.

This is particularly acute for the next generation of workers with 70 per cent of young people currently entering the workforce in jobs that will be radically affected by automation.

By 2050, 13 of Australia's 19 industry sectors will be either transformed or gain significant benefit from information and communications technology, according to IBISWorld.

Major economic and employment opportunities are presented by embracing policies that support and encourage tech-fuelled innovation. For example in the US, experts have found that the technology sector is able to create jobs 25 times faster than the rate experienced by other US industry sectors.

The countries that will prosper are the ones that understand this, that put the policies in place to make the most of this and adapt the fastest. We either empower our people to seize these opportunities or get left behind as the world moves ahead. As MIT Professors Brynjolfsson and McAfee noted in their seminal text, The Second Machine Age:

"There’s never been a better time to be a worker with special skills or the right education, because these people can use technology to create and capture value. There’s never been a worse time to be a worker with ‘ordinary skills’ and abilities to offer, because computers, robots and other digital technologies are acquiring these skills and abilities at an extraordinary rate."

This is very much a "global brains race" with developing and developed nations all competing. The 2015 Global Entrepreneurship Index revealed that regions with the fastest rates of growth in entrepreneurship include the Middle East and North Africa.

After two years of Liberal Government inaction on innovation, Australia is lagging right at the time when we should be gearing up to compete. A recent Harvard Business Review of how countries around the world were adapting to the digitisation of society concluded that Australia was “stalling out”.

Why startups?

Australian startups are crucial to building the jobs of the future.

The Australian tech startup sector has the potential to contribute 540,000 new jobs in the next two decades.

Startups have the capacity to experience massive and sustained growth, often enabling them to become significant players in global industries within a small number of years – and to turn into large employers. A NAB report on innovation released in September 2015 shows that innovative firms are typically more optimistic about Australia’s future economic growth in the short & medium-term.

The combination of a startup’s growth potential, coupled with the growth in techenabled services and products means that the opportunities are exponential. But we need to anchor these firms in Australia.

Startups are not just web and mobile businesses: they can be based on cutting edge technology in any field including engineering, biotech, pharmaceuticals, energy, hardware and software. These firms are important in developing global micro-clusters right here in Australia that emerge from sectors where we have significant competitive advantages or generational industrial projects such as medical research, component manufacturing or defence technologies.

In particular, it should be noted that startups also include social enterprises and not-for-profits driven by technology which deliver innovative outcomes and address particular areas of need. For example, organisations such as the Khan Academy and Reboot Stories are using technology to reimagine experiential learning and deliver imaginative and educational activities to students from disadvantaged backgrounds.

The majority of jobs to be created over the next decade and beyond will be in companies that don’t exist today. That is why it is important to put policy in place that helps grow as many of these companies as possible. Startups also represent the future of how we work as much as where we work, with greater shifts to ‘portfolio work’ and accordingly there are considerable societal benefits of increasing entrepreneurialism.

Australia has some great startups. We are pioneering new ways of using technology through companies such as Computershare, Seek and Looksmart. Newer companies like Atlassian, Campaign Monitor, and Freelancer already have a combined market capitalisation of around $3.5 billion. They are also significant and growing employers - Atlassian (1,100+), Campaign Monitor (117) and Freelancer (410) and Canva (42). We need more companies like this. Yet Australia currently has one of the lowest rates of startup formation in the world.

What is Labor’s plan for securing the jobs of the future?

Over the last two years, Labor has been working with industry on a comprehensive plan to deal with this transition, to secure today’s jobs, create tomorrow’s jobs and ensure that no one is left behind.

Every part of Labor’s policy offering is focussed on securing and creating jobs, generating wealth and opportunity – through productivity, innovation and inclusion – and this is no different in our approach to the digital economy and the possibilities for Australian startups.

Platform infrastructure

Labor is the party of nation building. From the Snowy Mountains Scheme to the National Broadband Network, Labor builds the infrastructure and jobs of the future.

The National Broadband Network is the biggest, most important infrastructure project in Australia’s history. It is vital to the way we will provide health services, deliver a world class education and build a strong and growing economy.

The National Broadband Network and ubiquitous high-speed broadband is the critical platform on which Australia’s digital economy will be built. Under Labor, 93 per cent of homes and businesses would have been connected to a super-fast version of the NBN that uses fibre optic cable to deliver speeds of up to 1gbps.

Malcolm Turnbull scrapped the world class Fibre-to-the-Premises NBN and the Liberals are instead building a second rate network that creates two classes of Australians – those with the super-fast Labor NBN and those who are stuck with the second rate Liberal NBN.

Malcolm Turnbull made a lot of promises on the NBN. He promised every home and business would have access to 25 megabits per second by the end of 2016. He broke that promise.

He promised that the NBN would be built for $29.5 billion. He broke that promise. He now says it will cost up to $56 billion.

Malcolm Turnbull has been talking about a digital future but for two years he has been responsible for rolling out the backbone of that digital future – the National Broadband Network. The NBN has been rolling out more slowly than Malcolm Turnbull promised and it will now cost much more than Malcolm Turnbull promised.

Skills and talent

Human capital is the key to realising the innovative potential of digital technology. From early childhood education to higher education and adult re-training Labor is committed to making the investments to help all Australians reach their potential.

Currently, Australia does not adequately equip enough young people with the skills to start businesses, particularly high-growth startups. Leading innovative OECD countries have three times more R&D personnel in industry than Australia.

At critical growth points, startups are hindered by a lack of technical, engineering or business skills to help them evolve into larger businesses, forcing some to offshore their operations. We will need another 100,000 ICT workers in Australia in the next six years.

That is why it is important to invest in education. Labor recently announced a plan to introduce a Student Funding Guarantee and increase per student funding by 27 per cent compared to the Liberals plan. It is also why Labor will ensure that we have a strong public TAFE system to underpin vocational education through a TAFE Guarantee.

A key issue has also been the lack of focus and emphasis on STEM subjects. In 2012 only 16 per cent of higher education students in Australia graduated in STEM-related subjects, compared with 52 per cent in Singapore and 41 per cent in China. Three quarters of the fastest growing occupations today require skills in STEM and employment in STEM occupations is projected to grow at almost twice the pace of other occupations.

Moreover, current courses are not keeping up with technological disruption. Three in five university students are being trained in occupations where the vast majority of jobs will be radically affected by automation in the next 10-15 years. Among VET students, this number rises to 71 per cent.

The failure to lift the low levels of female and mature-aged workers within the ICT workforce has also been identified as a key barrier to overcoming the sector’s skill shortage issues. Active engagement with industry and the participation of governments and educational institutions will be required to address this skills shortfall.

Australia also experiences difficulty retaining talent. For example, it’s been estimated that more than 22,000 Australians are currently working in and around Silicon Valley. While international innovation centres will retain access to deep pools of capital and wider skill bases, Australia can lead in our region and more needs to be done to repatriate and attract talent back to Australia to grow the ecosystem here.

It is clear that technology will be the key driver for future growth and jobs. That is why we need to develop a policy architecture that is focused around productivity - continuous learning through limitless dynamic efficiencies in greater skills development to supplement conventional (and more limited) static efficiencies.

Capital

Accessing capital at vital growth points is cited as a concern by many within the early stage innovation space. Despite a rising inflow of US capital, this lack of funding for innovative enterprises currently hurts our growth and performance.

A key challenge for the nation is to unlock greater funding opportunities from angel and venture capital investors given that there are a high number of high net worth individuals in Australia.

More needs to be done to build stronger links between venture capital and one of the largest savings pools on the planet - Australia’s superannuation funds.

Labor will work with the financial services industry to develop options that create this nexus and allow for the flow of capital into the startup ecosystem.

Collaboration

Analysis from the OECD and the Australian Bureau of Statistics (ABS), using 2010-11 data, highlights that Australia has among the lowest rate of university and business collaboration in the OECD. Out of a total of 33 countries, Australia ranks 32nd on business to research collaboration for small to medium enterprises (SMEs), and 33rd for large firms.

Only four per cent of large Australian firms collaborate with universities and research institutions. In New Zealand it is over 20 per cent.

The breadth of innovation activity within Australia is also narrow. Around two-thirds of Australia’s startup activity takes place in just one city: Sydney.

Labor wants to see Australia in the top 10 nations within a decade for business to research collaboration – ensuring that our brightest minds are linked to business acumen.

We should explore ways to invite a broader contribution to our national innovation effort. Labor will ensure that the significant economic and civic benefits generated through innovation can be enjoyed by many, not just a few.

Across the world, leading educational institutions have created ecosystems to support growing business from ideas developed in those institutions such as Stanford’s StartX, Harvard’s i-Lab and the MIT’s Martin Trust Center for Entrepreneurship. The companies generated at MIT employ over 3.3 million people worldwide, if grouped as its own nation, would be the 11th largest economy in the world.

Working with Government

As one of the largest customers in our economy, the Australian Government can do more to support startups in their early growth phases by opening up opportunities to demonstrate their worth via access to government procurement. There is also more that needs to be done to increase the number of and access to publically available datasets.

While there are already many businesses and government entities collecting and using data, when data is open - legally and practically able to be accessed and reused by others - it has a different and greater value.

Culture of Entrepreneurship

One of the reasons for Australia’s comparatively low level of startups can be attributed to a culture that does not celebrate or promote entrepreneurialism.

Besides urging for the faster emergence of “animal spirits” to drive economic activity in Australia, the Reserve Bank of Australia has also sought to understand why entrepreneurialism has failed to grow at a rate comparable elsewhere, questioning whether the nation’s reward structures actually aid Australian entrepreneurialism. It’s clear a wider belief is forming that Australia needs to place significantly greater emphasis on stimulating a culture that encourages entrepreneurship and risk-taking if we want to spark Australian innovation. One way forward is to challenge and alter public perceptions through entrepreneurship education.

This culture cannot be forced. That is why Labor will focus on schools, TAFEs and universities as institutions to encourage entrepreneurship. This includes managing risks, and identifying opportunities.

We need to use our educational facilities as sandpits for the next generation of startups.

In addition and as has been remarked repeatedly there is greater need for collaboration across the economy between research and industry, and publicly funded research agencies such as CSIRO need to play an active role in facilitating this.

What has Labor been doing about this?

Labor has a proud record of acting to build Australia’s national innovation system including introducing a simpler, more generous R&D Tax Incentive, which has particularly benefitted the startup sector and increasing the Commonwealth’s investment in science research and innovation by 50 per cent in our last term.

From the first day that Bill Shorten became Opposition Leader, he has advocated for an even greater national effort on science, research and technology.

For nearly two years, as the Liberals have systematically torn down the architecture Labor built, we have been arguing that more needs to be done to create a suitable economic climate for startups.

This means providing the right stimulus and support for the sector, identifying and addressing market failures that are impeding economic growth and evolving and harmonising regulatory frameworks that continue to act as barriers to business investment.

Labor has advocated and supported improvements to arrangements on employee share schemes and employee share option plans. Labor has also proposed and indicated support for facilitating a framework for crowd-sourced equity funding.

In the Budget-in-Reply in May, Labor announced the following initiatives:

Give every child in Australia the opportunity to learn coding and computational thinking in school;

Establish a National Coding in Schools centre (NCIS) where business and industry can connect with teachers;

Establish a STEM teacher training fund to support 25,000 primary and secondary school teachers over five years to undertake professional development in STEM disciplines;

Encourage STEM graduates to teach, by offering 25,000 Teach STEM scholarships over five years, to address the shortage of qualified teachers. Recipients will get $5,000 when they commence a teaching degree and $10,000 when they complete their first year of teaching;

Provide 100,000 STEM Award Degrees – 20,000 a year for five years – which will provide a financial incentive for students to enrol in and complete a STEM undergraduate degree, in recognition of the significant public benefit of growing Australia’s STEM capacity. STEM Award Degree recipients will have their HECS debt written off upon graduation;

The $500 million Smart Investment Fund will partner with VCs and licensed fund managers to co-invest in early stage companies, providing a Commonwealth investment of up to 50 per cent of the startup capital needed to help Australian companies commercialise innovations; and

Work with industry on StartUp Finance, a partial guarantee scheme to improve access to finance to micro-businesses.

These initiatives will help to address some of the key challenges the Australian startup industry faces. We have also announced that the next Labor government will establish the Treasurer’s Entrepreneur Council that will meet regularly with the Treasurer. This package builds on these announcements.

All of these measures build on Labor’s broader economic reform commitments to invest in human capital – from early childhood education through to needs based funding for school, a TAFE guarantee and a fair and sustainable plan for universities – as well as nation-building infrastructure like the NBN and deepening our capital markets through increasing super savings.

The next stage in Labor’s plan

Labor has been consulting widely within the startup community about the reforms required to strengthen Australia’s startup ecosystem.

Labor’s reply to the 2015 Federal Budget contained the another wave of startup friendly reforms, reflecting our consultations to that point.

Labor will continue to announce further initiatives leading up to the next Federal Election because we understand and value the importance of getting the settings right and providing incentives and certainty for investment.

In this new wave, we propose the following further initiatives:

National Digital Workforce Plan

Skilling up Australia to capitalise on the imagination and power of our entrepreneurs must now a national priority.

Before being disbanded by the Liberal Government, the Australian Workforce and Productivity Agency devised a comprehensive approach to help generate the skills required for our emerging digital economy. Their 2013 plan – drawn together with the support of industry and major stakeholders - was ignored the Liberals.

Labor believes a detailed, far reaching blueprint will be required to tackle the serious skills deficits holding back the sector and preventing us from extracting the great economic advantage that comes from embracing innovation.

Reflecting the huge local and international demand for skills and talent, we need a National Digital Workforce plan that can meet the needs of our startup community.

Importantly, our National Digital Workforce Plan will not only focus on deepening the pool of talent available to support our startups – this is also aimed at boosting the digital skills base across the breadth of our economy. The key priorities of this plan will include:

Strengthening the flow of entrants into the workforce who are keen to develop their ICT skills and seek opportunities within our digital economy;

Improving the quality of ICT teaching in schools, vocational and tertiary education arenas;

Strengthening the quality and suitability of tertiary graduates for entry-level positions;

Lifting the functional knowledge of ICT within traditional industries and existing companies, to ensure we have a workforce that is capable of quickly adapting to technological change; and

Boosting the digital skills within small to medium sized enterprises.

Startup year

Labor will boost Australia’s young aspiring entrepreneurial talent by providing income contingent loans to students to support their participation in university accelerators or similar incubators run by successful entrepreneurs.

Delivering new startup loans through the existing HELP system will offer final year students and new graduates the option of taking an additional business-focused year so they can develop their innovative startup ideas. This new approach will grow Australia’s pool of young entrepreneurs, help drive innovation and grow much-needed links between universities and the startup community, encouraging universities to draw in private sector mentors and investors.

Startup loans will be offered to 2,000 students and new graduates each year that want to establish a startup within a university-based (or similar) accelerator. The loan will cover the cost of the support provided to them by an accredited accelerator program and accredited non-award programs and initiatives, up to the maximum annual student contribution level under the HECS system.

To be eligible for support, young entrepreneurs must be participating in an accredited program that will help them through mentoring and professional development as well as offering potential access to additional capital and investors to support successful business ideas. It is anticipated that accelerator and incubator programs will over time develop student venture funds to directly support businesses within the program and connect with the wider VC community.

While some universities have taken the lead in establishing postgraduate entrepreneurship programs, we must ensure that HELP program rules are not stifling innovation in the delivery of practical learning experiences that enable students to develop sustainable business ventures in a university setting.

This approach maintains the financing architecture of the HECS-HELP system and the student income support system.

It aims to encourage systemic change at universities through supporting the development of university accelerators and incubators. Overtime this may assist in supporting more partnerships with well established and leading facilities such as Tank Stream Labs, Blue Chilli, Fishburners, ATPi and equivalents around the country.

Overtime, this program will drive a competitive market as education institutions seek and develop the best talent and draw in private sector mentors and investors. This will improve collaboration between universities and the investment and technology sectors and strengthen Australia’s entrepreneurial ecosystems.

As a result of working with higher education institutions, tech entrepreneurs and investors will be better placed to identify opportunities for commercialisation of university research, while building these links will make it easier for potential entrepreneurs within universities to seek out business opportunities. Over time, we will be able to build a stronger risk-taking culture, leading to more innovation and higher productivity in our economy.

New visas for early-stage entrepreneurs

Labor will introduce two new visa categories that will help attract the best global entrepreneurial talent to help build Australia’s growing startup ecosystem.

Startup Entrepreneurial Visa

The Startup Entrepreneurial Visa will be provided annually to 2,000 global entrepreneurs looking to establish themselves in Australia;

This visa will be provided to applicants with proven access to capital [in the order of around $200,000] that they will invest in a startup venture in Australia (though less if funding has been provided by a venture capital firm registered with the Australian Private Equity and Venture Capital Association Limited or by startup accelerators and incubators);

This visa category will run for a maximum of 3 years, though visas may be extended for another year or converted to permanent residence after 2 years if all eligibility requirements are met.

Graduate Startup Entrepreneurial Visa

This new visa will be provided annually to 2,000 university graduates who have a credible and genuine startup business idea.

Graduates will be allowed to stay in Australia for 1 year to establish a startup business after graduation. Graduates can apply to extend this visa for a second year provided they have a new endorsement letter from their higher education institution confirming they have made satisfactory progress in developing their business.

There will be no upfront funding requirement for this visa, though graduates will require endorsement from a participating higher education institution.

The UK, Singapore, New Zealand, Ireland and a number of other countries have all created specific visa policies to attract a growing pool of early-stage entrepreneurs. These new visa categories will better position Australia to compete for the best and brightest global talent which will help enhance Australia’s domestic startup ecosystem.

Innovation Investment Partnership

Historically, Labor has been well placed in bringing together groups to work as one for the national economic interest – a major economic priority right now must be opening up pathways to encourage stronger investment flows towards innovation activity in this country.

Labor will establish an Innovation Investment Partnership, bringing together VC, superannuation fund and startup stakeholders – designed to identify and overcome barriers to investment in Australian-based VC funds.

It will also explore opportunities to develop mechanisms that encourage the superannuation sector to invest in and support Australian venture capital, as occurs in almost every other developed economy in the world.

Building the linkages between VCs and super funds will provide an added longer term benefit for startups – sharpening up their commercial and business acumen through the process of seeking funding support.

This may include, but it is not limited to, exploring ways in which we can have the right policy architecture and regulatory framework for super funds to invest in highly innovative businesses, creating a bundle of regulator-rated or verified domestic venture capital and private equity funds, as well as encouraging self-managed super funds to aggregate capital for certain asset classes. Other proposals also include examining the merits of a liquidity ‘back-stop’ for superannuation funds.

Getting startups and SMEs solving government problems

Government purchasing decisions are too often steered towards acquiring well established products and services. Conservative decision-making prevents Commonwealth agencies from engaging effectively with startups and SMEs.

This means that new technologies and the offerings of Australia’s innovative SMEs are often bypassed.

But with Commonwealth Government procurement worth over $48 billion per year, we should be encouraging departments and agencies to better engage with SMEs and startups, to drive innovation and help Australian entrepreneurs prove the value of their ideas.

Labor is announcing a two-pronged approach to attract the smartest minds to public policy problems, and to support startups and SMEs to be more competitive in selling to government.

Challenge Platforms

Labor will trial an ‘AusGov Challenge Platform’ to engage all Australians in the challenges that face Government.

Similar to challenge.gov in the US, this platform will provide a single portal for government agencies to submit challenges for the public to respond to.

The trial will initially engage a group of ten to twelve agencies that are seeking to identify new approaches to utilising data, technology and analytics to solve their policy and management challenges.

These projects – essentially competitions – will be managed through a centralised online platform, with agencies setting reward funding or prizes on the basis of the expected return to government from solving the problem.

In the United States, for example, the National Oceanic and Atmospheric Administration is offering $10,000 in prizes for the creation of a system to automate the identification of endangered right whales using a dataset of aerial photographs. At the other end of the spectrum, the Department of Veterans’ Affairs is offering $300,000 in prizes to create algorithms for identifying redundancies, gaps, conflicts and interactions among care-plan items and other data.

Labor will commit $5 million to establish the online challenge platform and build capacity in agencies that choose to participate in the trial. If successful, the platform will be expanded and the procurement rules and processes amended to enable the challenge platform to grow and adapt as agencies develop new, more complex challenges.

Supporting startups and SMEs to compete in government tenders

Labor will encourage Commonwealth agencies to engage in and support pre-commercial collaboration with SMEs and startups to give them a foot in the door on procurement tenders. This is not about picking winners or targeting particular firms, but about levelling the playing field for innovative Australian businesses that otherwise struggle to compete in government procurement.

The program is designed to support pre-commercial collaboration between agencies and SMEs, well in advance of tenders being released, to help firms develop capabilities and address issues around finance, skills and product development.

It will be structured in a similar way to the Small Business Innovation Research program (SBIR) in the US and the Victorian Government’s SME Market Validation Program. Funding will be offered at two levels – a phase one grant of up to $100,000 for detailed research and development and feasibility assessment; and phase two funding for proof-of-concept where the feasibility stage has demonstrated that the idea has strong potential for commercial development.

The previous Labor Government announced a similar program as part of its Plan for Australian Jobs, but the Liberals abandoned the initiative, leaving startups behind yet again.

Labor will commit $5 million to this program over two years as an initial investment.

Labor values

Labor is committed to providing the support necessary as our economy transitions to an exciting era of possibilities.

Underpinned by the principles of equity and fairness we know that the transition will not be smooth, and that there will be dislocation.

That is why Labor is best placed to manage change, to support retraining, the diversification of industries. We want to encourage and support midcareer changes, and transform our economy without leaving people behind.

Financial Implications

The Budget impact of this package of measures is $15.5 million over the forward estimates.

The additional expenditure will be offset, over the forward estimates and the medium-term, by existing commitments to reform the taxation of multinational entities and superannuation tax concessions, and the abolition of the Emissions Reduction Fund.